AI Generated Summary
Purpose
This bill changes how Minnesota taxes estates by phasing out the Minnesota estate tax over ten years. It keeps a gradual reduction of tax rates starting in 2025, with the goal of eliminating the tax by 2034. It also updates how the tax is calculated to tie Minnesota tax liability to both Minnesota assets and gifts, and to the size of the estate as reported on the federal side.
Main Provisions
How the tax is calculated
- The tax is computed by applying a rate schedule to the Minnesota Taxable Estate.
- Minnesota Taxable Estate is determined using Minnesota gross estate plus gifts with Minnesota situs, divided by the federal gross estate plus gifts, then multiplied by the applicable rate.
- This keeps a link between Minnesota property/gifts and a federal baseline (the denominator uses the federal gross estate plus gifts).
- “Gifts under section 291.016 subdivision 2 clause 1 and clause 3” are included in the calculation.
Estate death-year rate schedules
- For decedents dying in 2017, there is one tiered schedule with specific bracket thresholds and base amounts.
- For decedents dying in 2018 and thereafter, there is a separate tiered schedule with different starting thresholds and rates.
- Both schedules set how much tax is due based on the size of the Minnesota Taxable Estate.
Ten-year phaseout (phaseout mechanism)
- Beginning July 1, 2025, the commissioner must reduce the rates in the schedule by 1.6 percentage points on each July 1 through June 30, 2034.
- This continues until each rate reaches zero.
- If a reduction would push a rate below zero, that rate is set to zero, and the corresponding dollar amounts in the brackets are reduced accordingly to keep the math consistent.
Minnesota situs and gifts
- The calculation explicitly uses Minnesota situs property and gifts, and includes certain gifts to determine the Minnesota Taxable Estate.
Implementation scope
- The bill retains different rate structures based on whether the decedent died in 2017 or 2018 and thereafter, but the overarching goal is to phase out the Minnesota estate tax over a decade.
Significant Changes to Existing Law
- Establishes a ten-year, scheduled reduction of Minnesota estate tax rates (1.6 percentage points annually on July 1 from 2025 through 2034) to reach zero.
- Replaces or updates the existing estate tax rate structure with two death-year-specific schedules (2017 vs. 2018 and later) and ties the tax to Minnesota Taxable Estate calculated with Minnesota situs and gifts.
- Introduces a phased approach that gradually lowers both tax rates and the amounts added to each bracket if the phaseout would bring rates below zero.
Implementation Timeline (Highlights)
- 2017-decedent estates: Use the 2017-based rate schedule.
- 2018 and later-decedent estates: Use the 2018-and-after rate schedule.
- July 1, 2025: First scheduled rate reduction of 1.6 percentage points.
- July 1 each year through June 30, 2034: Continued annual reductions until all rates are zero.
Relevant Terms - estate tax - Minnesota Taxable Estate - Minnesota gross estate - federal gross estate - gifts (section 291.016 subdivisions 2 clause 1 and clause 3) - Minnesota situs - phaseout - rate brackets - Not over / Over (tax bracket language) - decedents dying in 2017 / 2018 and thereafter - base amounts and percentage of excess (as used in the bracket calculations)
Actions
| Date | Chamber | Where | Type | Name | Committee Name |
|---|---|---|---|---|---|
| February 03, 2025 | Senate | Action | Introduction and first reading | ||
| February 03, 2025 | Senate | Action | Referred to | Taxes |
Citations
[
{
"analysis": {
"added": [
"A ten-year phaseout of the Minnesota estate tax.",
"Rate reductions of 1.6 percentage points on each bracket beginning July 1, 2025 and continuing annually through June 30, 2034 until all brackets reach zero.",
"A modified tax calculation basis that uses the Minnesota gross estate plus gifts (per §291.016) in the numerator and the federal gross estate plus gifts in the denominator."
],
"removed": [],
"summary": "The bill amends Minnesota Statutes 2024 section 291.03, subdivision 1 to implement a ten-year phaseout of the Minnesota estate tax and to revise the rate schedule, including a mechanism to reduce rates annually from 2025 through 2034.",
"modified": [
"The calculation method is adjusted to incorporate gifts defined in §291.016 into the estate tax base, aligning the Minnesota tax calculation with the gifts framework and updating the bracket structure for decedents dying in 2017 and 2018 and thereafter."
]
},
"citation": "291.03",
"subdivision": "subdivision 1"
},
{
"analysis": {
"added": [
"No standalone new law; clause 1 of §291.016 is incorporated into the estate tax calculation in §291.03."
],
"removed": [],
"summary": "The bill references gifts under Minnesota Statutes §291.016 subdivision 2 clause 1 as part of the calculation of the Minnesota Taxable Estate, incorporating those gifts into the numerator of the tax base.",
"modified": [
"Gifts defined in §291.016 subdivision 2 clause 1 are included in the numerator of the Minnesota estate tax calculation."
]
},
"citation": "291.016",
"subdivision": "subdivision 2 clause 1"
},
{
"analysis": {
"added": [
"No standalone new law; clause 3 of §291.016 is incorporated into the estate tax calculation in §291.03."
],
"removed": [],
"summary": "The bill references gifts under Minnesota Statutes §291.016 subdivision 2 clause 3 as part of the calculation of the Minnesota Taxable Estate, incorporating those gifts into the denominator of the tax base.",
"modified": [
"Gifts defined in §291.016 subdivision 2 clause 3 are included in the denominator of the Minnesota estate tax calculation."
]
},
"citation": "291.016",
"subdivision": "subdivision 2 clause 3"
}
]Progress through the legislative process
In Committee